SEC Staff Issues Statement on Protocol Staking and Related Activities
8 June 2025
By: Ariel Yosefi, Dima Zalyalyeyev & Gal Mechtinger
On 29 May 2025, the US Securities and Exchange Commission’s (“SEC“) Division of Corporation Finance issued a statement providing the regulator’s views on the application of US federal securities laws to “Protocol Staking” of crypto assets on Proof-of-Stake (“PoS“) networks. While the statement does not formally alter or amend applicable law, it reflects a continuation of the more ‘crypto-friendly’ and innovation supportive regulatory approach that gained traction during the Trump administration in the US, that emphasizes technological innovation and regulatory clarity.
The statement focuses on staking activities (“Protocol Staking“) with regard to crypto assets that are integral to public, permissionless PoS networks, and are used to participate in or earned for participating in the consensus mechanism of such framework or earned for the maintenance of the technological operation and security of such network (“Covered Crypto Assets“).
Under the statement, the SEC’s view is that certain Protocol Staking Activities specified below do not constitute the offer or sale of securities under the Securities Act of 1933 or the Securities Exchange Act of 1934. As a result, the SEC’s view is that participants in the Protocol Staking Activities are not required to register these transactions with the SEC. The regulator’s conclusion is based, among others, on the application of the “Howey Test” for classification as “investment contract” (set forth in SEC v. W.J. Howey Co. 328 U.S. 293 (1946)), which assesses whether an arrangement involves an investment of money in a common enterprise with an expectation of profit derived from the efforts of others. The SEC has determined that expected rewards from Protocol Staking are derived from administrative or ministerial activities, not from the entrepreneurial or managerial efforts of others, a key criterion for securities classification.
Importantly, the statement underscores that this conclusion applies regardless of whether staking is done directly by individuals or through staking service providers, provided the core network function and asset characteristics remain the same.
The statement addresses three types of protocol staking (“Protocol Staking Activities“):
| Node Operator’s Self (Solo) Staking | Self-Custodial Staking Directly with Third Parties | Custodial Staking |
| Node operators stake Covered Crypto Assets which they own and control utilizing their own resources | Covered Crypto Assets’ owners delegate the validation rights | Third-party custodians stake Covered Crypto Assets on behalf of owners |
In its statement, the SEC has also addressed certain ancillary services provided by staking service providers, concluding that the offer or sale of such services does not involve the offer or sale of an “investment contract” under the Howey Test, as such services are administrative or ministerial in nature and do not involve managerial or entrepreneurial efforts. The regulatory has specifically addressed the following ancillary services:
- Slashing Coverage – a service whereby the service provider reimburses or indemnifies a staking customer for losses incurred as a result of slashing.
- Early Unbonding – a service as part of which the service provider allows an owner to receive the Covered Crypto Assets prior to the end of the protocol’s unbonding period.
- Alternate Rewards Payment Schedules and Amounts – a service as part of which the service provider delivers the staking rewards to Covered Crypto Asset owners at a cadence and in amounts that differ from the protocol’s default schedule or where the staking rewards are paid earlier or less frequently than as provided by the protocol, as long as the staking rewards amounts are not fixed, guaranteed, or exceed those provided by the protocol.
- Aggregation of Covered Crypto Assets – a service as part of which the service provider only enables Covered Crypto Asset owners to aggregate their assets to meet the protocol’s minimum staking requirements, without additional involvement or functionality.
Although the regulatory statement does not establish binding rules, it provides valuable insight into the regulator’s current position on the application of US securities laws to certain staking activities. For businesses engaged in or considering protocol staking or related activities, this informal statement may assist in navigating the complex regulatory landscape – particularly regarding when such activities are unlikely to be treated as securities offerings in the US.
Given the complexity and evolving nature of digital asset regulation, the affected businesses should begin reviewing their models of operation with regards to protocol staking and related service offerings in light of the principles outlined in the statement.
Please feel free to contact us with any questions or comments regarding this statement and how it may impact your current or future compliance considerations.
